10-year treasury bills
What is a 10-year Treasury bill?
The 10-year Treasury bill is debt issued by the United States government and has a 10-year maturity when it is first issued. A 10-year Treasury bill pays interest at a fixed rate once every six months and pays the nominal value to the bearer at maturity. The American government is partially funded by issuing 10-year Treasury bills.
The US government issues three different types of debt securities to investors, defined by the length of the term, to finance its obligations: treasury bills, treasury bills and treasury bills. Treasury bills (Treasury bills) have the shortest maturities, with terms of up to one year. The Treasury offers Treasury bills with maturities of four, eight, 13, 26 and 52 weeks. What makes treasury bills unique compared to treasury bills or treasury bills is that they are issued at a discount and pay no coupon. Investors receive just the face value of T-bills at maturity, making them zero coupon bonds.
T-bills are available up to 10 years, making the 10-year T-note the longest. The other maturities of T-notes are two, three, five and seven years. 10-year Treasury bills and shorter-dated notes pay semi-annual coupons and are not zero coupon debt securities. The 10-year note is the most widely used public debt instrument in finance, and its yield is often used as a benchmark for other interest rates, such as mortgage rates. T-bonds, like T-notes, pay semi-annual coupons, but are issued in terms of 30 years.
Below is a graph of the 10-year Treasury yield throughout 2020. Yield has increased for much of the year with increasing expectations of higher Federal Reserve interest rates. However, as these expectations declined towards the end of the year, the yield declined in response.
What Are the Benefits of Investing in T-Bills?
One advantage of investing in 10-year treasury bills and other federal government securities is that interest payments are exempt from state and local income taxes. However, they are still taxable at the federal level. US Treasury sells 10-year T-bills and shorter-dated notes, as well as T-bills and bonds, directly through the TreasuryDirect website via competitive or non-competitive bidding, with a purchase minimum of $ 100 and for every $ 100. They can also be purchased indirectly from a bank or broker.
Investors can choose to hold treasury bills until they mature or sell them early on the secondary market. There is no minimum ownership period. Although the Treasury issues new T-notes with shorter maturities each month, new 10-year T-notes are only issued in February, May, August and November (the original months), with re-openings in the remaining months of the year. The reopenings are 10-year Treasury bills issued with the same maturity dates and interest rate as the securities corresponding to the original months. All T-notes are issued electronically, which means that investors do not hold real paper reflecting securities, such as stocks.